Unilever stays in London

FEW companies can beat Unilever at marketing stuff, whether a bar of Dove soap, a box of Knorr bouillon cubes or a jar of Marmite savoury spread. Its bosses have proved rather less successful at pitching to their own investors. On October 5th Unilever’s board scrapped its plans to quit Britain in favour of the Netherlands after its own shareholders had balked at the move. There is enough egg on management’s faces to blend a jumbo tub of Hellmann’s mayonnaise.

The plan to simplify Unilever’s Anglo-Dutch structure was meant to be the parting triumph of Paul Polman, its chief executive for nearly a decade, who is expected to retire soon. Scrapping the firm’s dual holding companies, the legacy of the merger of the Netherlands’ Margarine Unie and Britain’s soapmaking Lever Brothers in 1929, would make the company more agile, its bosses had boasted. Rotterdam was pitched as the company’s new home in March, after months of boardroom deliberations. Its headquarters in London would be ditched.

Unilever denied that its proposed move had anything to do with Brexit, or with the gentler brand of capitalism practised in the Netherlands. Mr Polman has been a proponent of engaging all “stakeholders” when doing business, not merely short-termist shareholders, as Anglo-Saxon types are wont to do. An unwanted approach in February 2017 by Kraft Heinz, an American food manufacturer controlled by Warren Buffett’s Berkshire Hathaway and 3G Capital, a private-equity firm, highlighted the advantages (for management) of being based in a place where such takeovers could be stymied more easily.

To shareholders the move to Rotterdam was Marmite: some loved it, others hated it. Some British fund managers fretted that a fully Dutch Unilever would be shut out of the FTSE 100 index of companies in which they may invest (see chart). Why vote for a proposal that would force them to sell their shares in a well-run company? Mr Polman acknowledged this was a problem but seemed to think the investors should vote against their own interests for the company’s greater good.

The main consequence of keeping the current convoluted structure seems to be that it will be trickier to issue new shares to make a large purchase, or to spin off a unit. Neither is imminent. And sceptics point out that the dual structure was no hurdle to Unilever reshaping itself after Kraft Heinz’s approach, notably by selling its margarine business to a private-equity fund for $ 8bn in late 2017.

Unilever’s next move is unclear. The Netherlands has gone out of its way to get it to go Dutch. Mark Rutte, a former Unilever man turned prime minister, had even agreed to change the tax code in its favour. Plenty think the Rotterdam caper was driven by the personal preferences of Mr Polman and Unilever’s chairman, Marijn Dekkers, who is also Dutch.

Choosing London instead would probably irritate Dutch shareholders, who would argue they would be forced to sell shares in much the same way as their British counterparts declined to do. A compromise will have to be found. Royal Dutch Shell, another Anglo-Dutch group, hedged itself in 2005 by sending its headquarters to The Hague but keeping its primary listing in London. Unilever is no stranger to fudge, not least in its Ben & Jerry’s ice creams. It will have to create a similar confection for its aggrieved investors.